4.3.4 Mountain South (1861-1877): Cleaning Up After the Confederacy

Cleaning up after the Confederacy:  Confederate money transactions

Henly v. Franklin – Tennessee, 1866 (43 Tenn. 472); Robertson v. Shores – Tennessee, 1869 (47 Tenn. 164); Sherfy v. Argenbright – Tennessee, 1870 (48 Tenn. 128); Brown v. Wylie – West Virginia, 1867 (2 W.Va. 502); Harrison v. Farmers Bank of Virginia – West Virginia, 1873 (6 W.Va. 1)

  •  Confederate currency depreciated rapidly throughout the Civil War and became worthless with Lee’s surrender in 1865.  After the war, many Southern debtors attempted to pay off wartime obligations in Confederate currency, but their creditors wanted to be paid in U.S. currency.  The dispute occupied much time of Reconstruction-era courts, because the consequences of their decisions would shape the balance of economic power between creditors and debtors.  The dispute also implicated a larger issue:  should any aspects of the Confederacy be given legal effect, or should all of its acts be nullified ab initio (from the beginning)? 
  • Reconstruction courts were deeply divided over this issue, including those in the mountain South.  In West Virginia, Tennessee and Arkansas, Restoration-era judges) generally followed the lead of Richmond Pearson and other Old South judges (§ __) and upheld such transactions; judges during Congressional Reconstruction reversed them and were in turn reversed by Redeemer/Bourbon judges. 

“It [Confederate currency] was the life blood of the rebellion, an unlawful means to an unlawful end.” – Justice James Brown, in Wylie

“The success of the rebellion depended, in great measure, upon the ability of the Rebel authorities to sustain the credit of their currency … The intended and the actual effect of the issuance and circulation of this currency, was to make every noteholder a stockholder in the Confederacy.” – Justice George Andrews, in Robertson

“It seems to me now to be required by every principle of propriety and of reason, that the courts … respect the validity of the transactions and contracts of that people growing out of their civil and private relations during that [war] period, and not designed to aid in maintaining the rebellion.  To hold otherwise … might disturb the private and domestic relations of an entire community for no purpose, and to effect no good.” – Justice James Paull, in Harrison

“[F]or the repose of society, when contracts, or other transactions were executed, we would not, although originally predicated upon Confederate Treasury notes, disturb them.  This rule … more directly meets the torn and distracted condition of the country, than any other we could establish.” – Justice  Sam Milligan, in Henly

Entering the industrial age:  corporate regulation in the mountain South

State ex rel. Missouri & Mississippi River Railroad Co. v. Macon County Court – Missouri, 1867 (41 Mo. 453); Shelby County Court v. Cumberland & Ohio Railroad Co. – Kentucky, 1871 (71 Ky. 209); Mercer County Court v. Kentucky River Navigation Co. – Kentucky, 1871 (71 Ky. 300); Osage Valley & Southern Kansas Railroad Co. v. County Court of Morgan County – Missouri, 1873 (54 Mo. 156); Knoxville & Ohio Railroad Co. v. Hicks – Tennessee, 1877 (68 Tenn. 442)

  • Before the war, mountain South states embraced government subsidy of railroads.  The debt crisis triggered by railroad failures during the 1837-40 and 1857-58 depressions (see §§ ___) touched them more lightly than other states.  They resumed railroad subsidies shortly after the war, but corruption and railroad failures soon produced a reaction:  most mountain South states prohibited further state aid in the late 1860s, although they were more liberal toward local aid. 
  • When mountain South legislatures tried to cut back railroad subsidies and impose new taxes on existing railroads, the roads used the Dartmouth College doctrine (§ ___) to fight back, arguing that their corporate charters constituted a bargain with the states which the states could not alter with new restrictions on subsidies.  Most states countered by enacting anti-Dartmouth laws providing that all corporate charters would be subject to future changes in state law.   Many courts, such as Kentucky’s supreme court in Shelby County and Tennessee’s court in Hicks, sided with the railroads but made clear, based on the new laws, that all state laws would apply to corporations chartered in future. 
  • Following a rash of railroad failures the late 1860s, many mountain South municipalities (like their counterparts in parts of the Midwest, § ___) tried to escape their obligations to pay subsidies by arguing that they had lacked constitutional authority to take on such obligations.  But in cases such as Macon County, Mercer County and Hicks, mountain South courts rejected this argument and held that once they committed to aid a railroad, under the Dartmouth rule their obligation became absolute.       


West Virginia





State and local subsidy of railroads

1863:  State aid prohibited by constitution

1868:  Local aid authorized

1869:  State aid prohibited

1871:  Municipalities may aid railroads only if ¾ of voters approve; debt limited to 10% of total property value

1868:  Municipalities may aid railroads only if 2/3 of voters approve

1871: debt limited to 10% of total property value

1866:  Laws authorizing state aid

1868:  State aid prohibited by constitution; local aid authorized

Regulation of railroad rates






Transition to general incorporation laws






File:Twenty dollar bill Confederate States of America 1864.jpg

File:Confederate currency $100 John Calhoun.jpg

Confederate currency (one bill showing Tennessee state capitol) - courtesy Wikimedia Commons


File:Burlington Missouri River Railroad Burlington stock certificate.jpg

Burlington & Missouri River Railroad  Co. stock certificate (1870s) - courtesy Wikimedia Commons

“Whatever doubts may have existed, or might now be entertained, as to the constitutional validity of … municipal subscriptions for stock in railroads affording peculiar local benefits  … such subscriptions …. may now be regarded as of unquestionable constitutionality, in view of the numerous and uniform decisions of this court sustaining them.”  - Justice __, in Shelby County

“It is difficult to perceive how [local railroad aid] can be [a public purpose] with reference to the establishment of an ordinary private corporation, however great may br its influence for enhancing the property of the wealthy, or stimulating or promoting any particular private business or pursuit.”  - Justice Mordecai Hardin (dissenting), in Mercer County